Too Corrupt Not to Fail: Ukrainian Economy Won’t Recover Soon

Date of publication: 27 01 2016, 16:21

Despite its free trade agreement with the EU, the Ukrainian economy remains in a dire state, mostly due to rampant corruption and widespread tax evasion.

Even though the free trade agreement between the European Union and Ukraine came into force on January 1, EU ambassador to Kiev Jan Tombinski has remarked that the country’s economy is unlikely to recover anytime soon, according to WirtschaftsBlatt, an Austrian financial newspaper.

Speaking at the Europe-Ukraine forum, an event held in the Polish city of Lodz and organized by the local Institute of Oriental Studies, the ambassador remarked that the situation in Ukraine is unlikely to improve over the next two years.

Head of the Poland’s Supreme Audit Office Krzysztof Kwiatkowski also pointed out that a staggering 97% of all of Ukrainian exports are being directed to so-called ‘tax havens’, resulting in a significant decrease in tax revenues.

Apparently, while the EU association agreement does offer Ukraine a hope for new investments that may reinvigorate its economy, it also raises concerns in Kiev that Ukrainian companies may not be able to endure the competition with the European business ventures.

“There’s at least one thing that everyone agrees upon: Ukraine must enact reforms and exterminate the rampant corruption within the country,” WirtschaftsBlatt adds.

Dominique Menu, chief of the BNP Paribas Representative Office in Ukraine, said that 98 percent of US companies believe that corruption in Ukraine is widespread, with the judicial branch of the Ukrainian government – namely the courts and the prosecutor’s office — being especially corrupt.

The economic situation in Ukraine has been steadily deteriorating as the country’s GDP fell by 6.8 percent in 2014, while inflation soared to 24.9 percent. According to IMF projections for 2015, Ukraine’s GDP was expected to contract by 9-11 percent with inflation amounting to 46 percent.